“3% annualised GDP”…… Is the expectation/hope/dream set out by the new US Treasury Secretary Steve Mnuchin this week, as he and his fellow ex-Goldman Sachs colleague and now White House chief economic advisor Gary Cohn, set out “the biggest tax reform in American history.” Tax cuts, set to slash corporate rates from 35% to 15% and the current number of federal individual income tax brackets to three from seven, will be funded by a “pick-up” in economic growth says Mnuchin, whereby the increased revenue that he hopes for will pay for the cuts, known as revenue neutral. Aside of it being unclear whether any of Trump’s proposals will pass through Congress unmolested, especially the 2015 Bipartisan Budget Act, which suspended America’s debt ceiling and lapsed on 15 March, there is the little matter of where the 3%+pa economic growth is coming from. Subscribers’ will note from a long-term chart of US GDP, shown within the US economic data section below, that this magic level was last exceeded in 2006 and before that in late 1999. Any analogy between the Reagan era and now is a “dream” and should be quickly discarded by one major difference. Federal debt in the early 1980s was around $2 trillion but is now 10 times that, at $20,000,000,000,000, a massive weight on the economy at 105% of GDP. For a reminder of the other main differences between then and now, and just why 3% annualised GDP is a pipe-dream, you may wish to visit the 1st February knowledge share on “Trumponomics versus Reagonomics.”

Stocks had a decent week despite the anticlimax following the Trump tax-ream’s lack of detail, with Europe leading the charge, buoyed by the usual upbeat “smoke and mirrors” of the ECB press conference and despite the “war-drums” echoing towards North Korea. For more on the week’s main data, supported by interesting charts, read on:

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-